Saturday, 29 March 2014

MIA: Audit firms need to improve documentation process

PETALING JAYA: Audit firms should take stringent steps to improve on the documentation of audit procedures performed and the gathering of sufficient audit evidence to establish a solid and firm basis to support their audit opinions, according to the Malaysian Institute of Accountants (MIA).

In its Practice Review Report, the accountancy body found that in many firms, the partner’s involvement in the audit at the planning stage was not evident.

It also found that there were no formal policies and procedures on professional independence requirements, nor was there formal documentation of the procedures performed during the evaluation and acceptance or continuation of prospective and existing clients.

On human resources, many member firms did not maintain record on professional development for staff or documentation on performance evaluation conducted on the employees.

Other common findings it came across were a lack of audit planning documentation, no indication of any documentation to show the auditor had considered the risks of material misstatements in the financial statements due to fraud or error.

Customised audit programme was also not used in the execution of audit engagements, and if audit programme was used, there was no cross-reference to the respective detailed audit working papers where work is performed.

There was no working paper prepared to summarise the significant audit findings that form the basis for the audit opinion. “Such working papers should document the firm’s decision on any major issues of an engagement to support the audit opinion expressed,” the report said.

President Johan Idris said in a note in the report that firms were encouraged to comply strictly with procedures and international standards on auditing in order to mitigate risks.

He added that Malaysia had been resilient in the face of tidal waves of uncertainty in times when many Western economies faced a financial and currency crisis. “Malaysia’s diligent manning of her venerable financial institutions and the establishment of a well-integrated regulatory eco-system has contributed to our resilient economy.”

The findings are derived from MIA’s ongoing efforts through practice review, mainly conducted on small and medium size member firms.